JERUSALEM (AP) -- An Israeli-American entrepreneur has brought in a $350 million investment to help finance his ambitious plan to lay down the world's first electric car grid by next year, his company announced Tuesday.
Project Better Place said it signed an agreement with an HSBC-led investor consortium that marks one of the largest clean-tech investments in history. Other investors included Morgan Stanley Investment Management and Lazard Asset Management.
Better Place's founder, 41-year-old Shai Agassi, called the HSBC move a "validating step of investing in a private company intent on bringing innovation to the trillion-dollar automotive and energy industries." Agassi's company is valued at $1.25 billion with the new financing.
The project's backers say the electric car would drastically reduce oil dependence, cut carbon emissions and blaze a trail for more environmentally friendly means of transportation. But experts caution that technical pitfalls, such as a limited battery range, must be overcome before the car will be marketable.
Another looming challenge is the huge investment needed in charging stations for the cars.
Other car manufacturers are gambling on gas-electric hybrids as the green cars of the immediate future, but the HSBC-led investment signals growing confidence in the fully electric model.
Israel's government endorsed the project two years ago, and the country is slated to be the first to have electric cars on its highways in large numbers, starting next year.
The Danish energy company DONG Energy AS has adopted the Better Place model and plans to have thousands of cars running on electricity generated by wind turbines by 2011.
The Israeli project is a joint venture between Renault-Nissan, which will provide the electric vehicles, and Agassi's Silicon Valley-based startup Project Better Place, which will operate the recharging grid. The replacement and charging of the lithium-ion batteries is supposed to work like cell phone batteries.
Drivers will pay a monthly subscription for the batteries, with different plans like those of cell phone users. The company says the rates will come to less than the average monthly expenditure on gasoline.
As part of the deal, HSBC's head of global capital financing, Kevin Adeson, will join Better Place's board of directors and HSBC will own approximately 10 percent of the company's shares.
"We are confident that Better Place has the technical and commercial solutions to allow for the mass adoption of electric cars in the near term," Adeson said in a statement.
"The Better Place switchable battery solution, which addresses the range limitation of fixed battery electric cars, will offer the consumer an affordable and attractive alternative to current combustion engine and hybrid vehicles."
Israel has been touted as the ideal laboratory to test Agassi's vision because of its high gasoline prices (around $6.30 a gallon), dense population centers and supportive government. Some 90 percent of Israeli car owners drive less than 45 miles per day, and the country's major urban centers are less than 100 miles apart, making the use of battery operated cars more feasible than in countries with longer commutes.
Green cars are also particularly attractive to Israel, which hopes to weaken the political clout of its oil-rich enemies.